India's Gold Market Turmoil: Grey-Market Operators Profit from Tariff Hike

India's gold market has seen an unexpected shift since the government raised import tariffs to 15% in May, creating an arbitrage opportunity that benefits grey-market operators at the expense of organised players.

The World Gold Council (WGC) reports that India, the world's biggest gold consumer after China, has seen a significant increase in unofficial gold inflows since the tariff hike. This surge is widening margins for unauthorised traders and hurting legitimate businesses.

Sachin Jain, chief executive of the WGC's Indian operations, pointed out the enormous difference between the duty and GST rates, which amounts to an 18% advantage for grey-market operators.

This has led to a resurgence in gold smuggling, with industry officials predicting that illegal imports could exceed 100 tons in 2026. The recent seizure of nearly twice as much gold between May 13 and June 30 compared to the preceding period suggests that enforcement agencies are struggling to keep pace.